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THE GREEN BAG

but now long lost, identity between nominal capitalization and actual capital or net assets. When the English Crown issued or the English Parliament authorized corporate charters, there was a jealousy of the money power of the corporation. The charter fre quently, as in the trading corporations of the time of Queen Elizabeth, gave or sought to give a monopoly of some kind to a cor poration. The power of the corporation was dreaded; it was at least a matter of privi lege or favor. It was, therefore, to be limited to such and such an amount of wealth. In our time and certainly for our country, this purpose has been practically lost. In New York and New Jersey, for instance, the old limits upon capitalization have been abolished. We have a one and a half billions corporation. We may come to have a ten billion dollar company. If capitalization be eliminated, as I am now proposing, it will be left to the cor.poration to issue as many or as few shares as it sees fit. The share, having no par value, bearing no par designation, will, in appearance, neither signify nor symbolize more than it does now in actual and ulti mate fact, that is to say, more 'than merely an aliquot share in the net assets and busi ness of the corporation. If a manufacturing company is to be formed at Concord with a capital of $100,000, my suggestion would be that the certificate of incorporation which New Hampshire issues shall, instead of requiring a thousand shares of $100 each, leave it to the corporators to issue as many shares as they see fit without par value. If the corporators choose to have a thousand shares each share, will signify a one thou sandth interest, nothing more and nothing less. If the company should be prosperous and its shares come to have great value, no one could object to their converting the 1,000 shares into 10,000 shares or 100,000 shares, for one share will, in each case, truthfully stand for an aliquot part in the business of the corporation determined by the then number of outstanding shares. If

the corporation were a bank, and ought to have a minimum active capital in money, say $100,000, the charter would provide that, before the corporation begins business, it should have net assets of at least $100,000. An institution, or other investor holding shares of stock, is apt to keep an inventory stating the par value of the shares held and the actual value. If it be 100 shares of Boston & Maine stock, the inventory may show $10,000 in par value, or 100 shares at $100 each. Now what useful purpose does the $100 or $10,000 serve in the description of the assets? What does it add to the fact that the man owns 100 shares. Since the Boston & Maine Com pany has a total capitalization of 320,125 shares, the man owns jvaVYW parts of the net assets franchise and business of the railroad company. That is all there is of it. May I now take up objections to this reform? If it be said, as perhaps it will, that a corporation should be made to state its capital, the answer, as I have already sug gested, is that nominal capitalization is not a statement of capital and that the change proposed is in no way inconsistent with corporate obligation from time to time to state actual net capital. The legislature may require and, in my opinion, it ought to require, for purposes of taxation, and per haps for other purposes, an annual state ment by every corporation of its net assets and their value. The nominal capitaliza tion of a company affords the taxing authori ties no information, or, at any rate, merely a prima facie presumption, which is. or invariably should be, supplemented and corrected by an actual statement. For purposes of general taxation, our present system of corporate capitalization is of no real use whatever. It is something like the silly system of personal taxation in New York City by which the assessors prelimi narily fix the personalty of every man living in one street at $50,000. of every man in another street at §25,000, and so on, and